The Insurer moved for summary judgment on both counts. First, the Insurer argued that the policy contained two exclusions, each of which independently barred coverage. The trial court agreed. The first exclusion barred coverage for “loss or damage, costs, attorney’s fees or expenses which arise by reason of . . . (3) Defects, liens, encumbrances, adverse claims or other matters . . . (d) attaching or created subsequent to” the date of the policy. The second, barred coverage for loss or damage, costs, attorney’s fees or expenses “which arise by reason of . . . [t]he terms, conditions, agreements, covenants, restrictions, reservations and easements contained” in the declaration of the common interest community.
The Appellate Court found that the second exclusion, which barred coverage for losses arising by reason of the terms contained in the declaration of the common interest community, unambiguously excluded coverage for the Insured’s dispute with the subdividing property owner, which centered on the documents creating the common interest community. Because the Appellate Court found that the second exclusionary clause applied, it did not need to resolve the issue of whether the first exclusionary clause barring coverage for losses arising by reason of matters attaching or created subsequent to the date of the policy was ambiguous.
Second, in support of its claim that the Insurer breached the covenant of good faith and fair dealing, the Insured argued that the Insurer allegedly gave preferential treatment to the subdividing property owner (with whom it also had a relationship) and disclosed the Insured’s confidential information. As for the former claim, because the Insured could not demonstrate a nexus between how the preferential treatment of the subdividing property owner impaired Plaintiff’s right to enforce any benefits she was entitled to receive under the policy, the trial court held that summary judgment was appropriate. On appeal, the Insured argued that it was improper for the trial court to require a link between her allegation of lack of good faith and the terms of the insurance contract. The Appellate Court disagreed, upholding the long established principle that “[t]o constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff’s right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith.”
With respect to the latter argument, the trial and appellate courts each found that an uncontroverted affidavit from the Insurer averring that it never disclosed the Insured’s confidential information sufficiently dispelled with the Plaintiff’s argument.
